Bridge the ‘Comp Chasm’ with Trust, Transparency

While 73 percent of employers say they pay their workers fairly, only 36 percent of employees agree, according to the
2016 Compensation Best Practices Report, published in March by PayScale, a Seattle-based compensation software company.

The report draws on survey data from 7,600 business leaders and 71,000 employers from mostly U.S. and Canadian organizations across a range of industries. The findings show “a very interesting, and maybe alarming, disparity in the responses between employees and employers,” said Tim Lowe, PayScale’s senior vice president of marketing.

Bridging the Chasm

“You see it not just in attitudes about pay fairness but in questions such as whether employees feel valued at work—only 45 percent do—while more than two-thirds of employers say that employees are their greatest asset,” Lowe said. “Something’s not coming through; there’s a huge perception gap.” He called this the “comp chasm.”

The ‘Comp Chasm’

Sentiment

Employees

Employers

Believe that employees are paid fairly

36%

73%

Believe that employees are valued at work

45%

78%

Report that their company is transparent about pay

21%

40%

Source: PayScale

“There’s a real opportunity to manage the perception gap,” Lowe said. He linked employees’ perception of pay fairness with retention, noting that for the fifth year in a row PayScale found that “seeking higher pay elsewhere” remains a key reason employees leave.

Drilling down, PayScale found that the top reason given for leaving a job was:

• Among woman—I found a job elsewhere that pays better.

• Among men—I want more opportunities for advancement.

However, a desire for advancement also relates back to the pursuit of higher pay (along with greater responsibility and higher status).

Transparent Pay Practices

Nearly 40 percent of companies report that they have “transparent, open communication” around pay, but only 21 percent of employees “agree” or “strongly agree” with that contention, the survey found.

Even so, few employers plan to change their ways: Less than 1 in 5 nontransparent companies are planning to increase pay transparency in 2016.

“Transparency doesn’t necessarily mean posting everyone’s salary on the wall, what is sometimes called ‘radical transparency,’ which might fit some cultures” but not others, Lowe said. “There’s a spectrum of pay transparency and a huge amount of value of moving your organization up the transparency spectrum” by sharing some of the mechanics and philosophy around compensation, he said. This includes “explaining what data sets you use to benchmark employees’ positions and how you know that the data is fresh. And explaining salary structures: if you’re using ranges and grades, where employees fall along those ranges.”

Interestingly, the survey found that 82 percent of employees said they would feel satisfied with below-market pay as long as their employer was transparent about the reasons. So even if an organization is paying positions below market averages because it can’t afford to pay at market, “employees who receive open and straightforward communications about the reasons for that are apt to accept that rationale and to remain with that employer, and to remain engaged,” Lowe said. “Try additional communication before resorting to additional compensation. Train your people to have those conversations. The moral is if you want them to stay, talk about pay. Even without changing the numbers, you can move the needle on employee perceptions.”

Millennial Considerations

Millennial workers are now the dominant cohort in business, and “companies are trying to figure out what that means from an attitude perspective,” Lowe said. Survey data show that Millennials care about transparency, flexibility and fairness, he noted, and “Millennials care about being part of the conversations in their organizations.”

Companies may want to think about “doing things a bit differently now that their employee population is changing,” he observed. “If you open up about what you value and why you pay the way you do, and share that with your employees, you’re building trust,” Lowe pointed out. “And trust is a powerful engagement tool for driving business success.”